Financial Technologies Group sells Singapore arm SMX for $150 mn, Jignesh Shah gets cash to fight NSEL crisis

Written by Express news service | Singapore/Mumbai | Updated: Nov 20 2013, 03:49am hrs
Financial TechnologiesShares of Financial Technologies soared by 11 per cent to Rs 201.40 on the BSE in early trade. Reuters
Fighting a major crisis at its group entity NSEL, exchange operator and technology provider Financial Technologies India Ltd (FTIL) today announced sale of its Singapore-based bourse SMX for $150 million (Rs 931 crore) to US-based InterContinentalExchange (ICE).

The sale of Singapore based exchange SMX by the Jignesh Shah-led Financial Technologies announced this morning will provide some cash to meet the mounting pay out arrears at his other group firm NSEL. The dues from NSEL are about Rs 5,500 crore while SMX sale provides Shah only about Rs 930 crore. Hardly Rs 200 crore has been paid out so far from other sources.

Jignesh Shah-led Financial Technologies Group had launched Singapore Mercantile Exchange (SMX) with much fanfare over three years ago in August 2010 as a pan-Asia trading platform for various commodities including metals, energy, currency and agriculture commodities.

Financial Technologies would use sale proceeds to retire debts.

Financial Technologies, the main holding firm for Jignesh Shah-led group that has also set up Indian exchanges like commodity bourse Multi Commodity Exchange of India Ltd (MCX), stock exchange MCX-SX and now crisis-hit NSEL (National Spot Exchange), held its stake in SMX through a wholly owned subsidiary Financial Technologies Singapore Pte Ltd (FTSPL).

Reacting to the announcement, shares of Financial Technologies soared by 11 per cent to Rs 201.40 on the BSE in early trade. However, later the stock pared some of the gains and was trading at Rs 201.40, up 3.97 per cent during afternoon trade.

In a regulatory filing to Indian stock exchanges where Financial Technologies is listed, the company said FTSPL has reached an agreement to sell 100 per cent of its equity ownership in SMX (together with its wholly owned subsidiary SMX CC) to ICE Singapore Holdings, an entity owned by US-based ICE group.

The transaction was approved by the Board of Directors of FTSPL and Financial Technologies yesterday with signing of definitive agreements and is subject to certain customary closing conditions and approvals, the company said.

Financial Technologies will primarily utilise the proceeds towards repayment of outstanding debt towards External Commercial Borrowings (ECB) and Foreign Currency Loan (FCL) to banks subject to regulatory approvals, if any, pursuant to which Financial Technologies will become debt/lien-free, it said.

The group has been going through a major crisis for past few months ever since a Rs 5,600-crore payment default came to light at NSEL, although various entities including SMX have been saying they were not affected by these developments.

Still, Indian markets regulator Sebi has already set up an expert panel to oversee key functions and operations of MCX-SX, while commodities market regulator FMC has served show-cause notices to Financial Technologies questioning their 'fit and proper' status to run MCX.

The group also has exchange ventures in countries like Mauritius, Dubai, Bahrain and Africa.

SMX and its wholly owned subsidiary Singapore Mercantile Exchange Clearing Corporation (SMXCC) had said in early August that "the developments that have taken place in the last week at another Exchange of their group company Financial Technologies India Ltd (FTIL), have no impact on its business or any other factors including liquidity and risk bearing abilities.

"SMX and SMXCC are independent entities incorporated in Singapore, and have been operating as an Approved Exchange and an Approved Clearing House respectively under the regulatory framework in Singapore since 2010.

"SMX and SMXCC have sufficient capital and guarantee funds as well as a robust risk management mechanism in compliance with the regulatory requirements in Singapore to ensure the protection of interests of their members and customers," they had said.

Meanwhile, IntercontinentalExchange Group said it has entered into a definitive agreement to acquire Singapore Mercantile Exchange (SMX) in an all-cash transaction.

The acquisition will add to ICE's current network of markets and clearing houses in the US, Canada, Brazil, the UK and continental Europe, ICE said in a statement.

Under the terms of the agreement, ICE will acquire 100 per cent of Singapore Mercantile Exchange. This includes the SMX Clearing Corporation (SMXCC), a wholly owned subsidiary of SMX and the clearing house for all SMX trades.

The transaction is expected to close by the end of this year, subject to applicable regulatory approvals and closing conditions, ICE said.

"The acquisition of SMX represents an important step in ICE's growth trajectory as we look to expand our customer base and markets in Asia by establishing a local exchange and clearing presence.

"In recent years, Asia-based trading activity in our benchmark energy and interest rate products has been rising as the region increases in importance in global markets," said David Goone, Chief Strategy Officer, ICE.

"ICE has had a presence in Singapore for over a decade and today's announcement is a natural evolution of our strategy to further extend our network of markets across the globe," Goone added.

Post the deal, SMX and SMXCC will transition from their existing technology to the ICE trading and clearing platforms.

Through SMX, ICE will offer regional hedging opportunities for market participants to manage their price risk in a well regulated and transparent environment, ICE said.

SMX will continue to be based in Singapore and operate as a separate recognised body with its own independent board of directors, including Ang Swee Tian, the former President of the Singapore Exchange (SGX).

With inputs by PTI